World Bank's top economist calls on India to be champion of debt relief initiative

The finance ministry and the RBI co-hosted a G20 Finance Track event on August 11 on the challenges, opportunities, and the way forward for the global economy.

Indermit Gill, the World Bank's chief economist, has called on India to be the champion of the Debt Service Suspension Initiative (DSSI).

Speaking via video-conference at a seminar in Mumbai organised jointly by the finance ministry's Department of Economic Affairs and the Reserve Bank of India, Gill said on August 11 that countries such as India and Indonesia should not wait for larger countries to take the lead in the global matter.

"The protagonists (of the DSSI) have to be the countries that are managing their economies well," Gill said.

"And the countries that are managing their economies well right now are Indonesia and India and countries like that. They should be the one taking the lead. They should not be passive and wait for the US and others to do it. So I think it is about time India took the lead on these things," Gill added.

Gill was responding to a question by India's Chief Economic Adviser V Anantha Nageswaran about who could be the champion for the DSSI in the way the then US Secretary of Treasury Nicholas Brady was in the late 1980s for debt-laden developing countries.

Set up in 2020 in the immediate aftermath of the coronavirus pandemic, the Debt Service Suspension Initiative, or DSSI, calls for bilateral official creditors to temporarily suspend debt service payments from poorest countries. However, it was soon recognised that relief beyond the DSSI was needed to help vulnerable countries, which led to the Common Framework for Debt Treatments. The Common Framework allows debt rescheduling tailored to the specific needs of requesting countries.

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While Gill called for India and similar countries to take the lead in debt relief, Deepak Mishra – director and chief executive of the Indian Council for Research on International Economic Relations (ICRIER) and part of the discussion along with Gill – said India had already taken the lead by making debt relief for poor and vulnerable countries one of the key agenda items for its G20 Presidency and co-chairing the Global Sovereign Debt Roundtable along with the World Bank and the International Monetary Fund.

Mishra, who worked at the World Bank before ICRIER, said it was unfair to expect results on debt relief from the G20 under India’s Presidency.

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"We have talked about how multilateralism in is crisis. And then we say G20 should deliver. But G20 is also a multilateral forum. So G20 is fractured... And I think countries like India and I am sure Brazil and South Africa will try to do the best they can in the given very constrained environment, but overall I am not very optimistic that we will be able to solve this through G20. I think developing countries have to basically take charge of their own destiny and figure it out," Mishra said.

Responding to Gill's comment that India should take the lead on debt relief, Mishra said the leader must come from organisations which have the most at stake.

"The reason why Nicholas Brady was at the forefront was because America was most exposed to the Latin America debt problem… So I think (World Bank President) Ajay Banga could actually emerge as a leader…. US has the G20 Presidency after South Africa, and my hunch is that's when you get the real debt relief," he added.